Spanish Prime Minister Rajoy's job is safe... for now

Spain's Prime Minister Mariano Rajoy speaks during a Spanish parliament session in Madrid, today. Mr. Rajoy brushed off demands he should resign after text messages emerged showing him comforting a former political party treasurer under investigation over a slush fund and secret Swiss bank accounts.

Madrid — On Thursday, Spanish Prime Minister Mariano Rajoy apologized for “mistakenly” trusting a former close associate and friend, now in jail for his role in a corruption ring allegedly ran by the governing Popular Party (PP), but ruled out resigning or calling snap elections.

The government is indeed unlikely to change any time soon. A solid PP majority in Parliament and the absence of elections in the short term shield Mr. Rajoy, despite heightened street pressure, plummeting popularity, and a hostile political opposition.

But experts say he also risked Spain’s stability in the spiraling corruption affair by refusing to address many inconsistencies that most Spaniards perceive in his explanation, including a rising number within the traditionally monolithic PP constituency, a poll published this week showed.

The Spanish leader again denied any personal or PP involvement, saying they were the victims of someone “who didn’t deserve to be trusted,” referring to Luis Bárcenas, the former PP treasurer under court investigation.

Rajoy portrayed himself as someone simply attempting to lay all cards on the table, but unjustly being prejudged by a sanguinary opposition maliciously trying to derail an economic recovery.

The opposition raucously demanded Rajoy’s resignation and grilled him – at times angrily – about numerous apparent inconsistencies to his reiterated claims of innocence, including a series of embarrassing friendly text messages of support he sent to Luis Bárcenas, even after investigators found 48 million undeclared euros ($63 million) stashed in secret foreign accounts.

But Rajoy is at little risk of being ousted by rival political parties or public pressure. “It’s going to be difficult for Mariano to leave, unless his own party tries to get rid of him,” says Félix Ortega, a sociology professor in Universidad Complutense de Madrid and an expert in public opinion. “His speech today was directed at them.”

Rajoy did not get into specifics about Bárcenas, despite being prodded multiple times. In one instance, one opposition party leader tabled 20 questions more suitable for a tribunal, each one potentially implicating the prime minister or forcing him to commit to a response, but all went unanswered.

“We are facing an astonishing and imaginative collection of falseness, as time and justice will show,” Rajoy said, but “it’s not up to me or my government or parliament to establish the truth about Mr. Bárcena’s deceits.”

He insisted though he would not be sidetracked and would govern, with the sole support of the PP if need be. And he warned the opposition, especially the Socialist Party, Spain's second largest, that calling a no-confidence vote would be damaging. “Don’t threaten me,” he said, warning of “the risks to the country.”

He would defeat any such attempt, Rajoy said, but warned that the attempt would have economic consequences, especially given “how difficult it has been to regain the market’s trust. Nobody wins and everybody loses from political instability.”

The risk

The risk, analysts and opposition parties agree, is that Rajoy wagered Spain’s stability on weathering the storm. Any new stunning surprises that raise more suspicions will further undermine credibility internally, diplomatically, and in markets, the opposition said.

“You have only worsened the political crisis,” Socialist leader Alfredo Perez Rubalcaba accused. “That is why you must go. A prime minister can’t depend on the sincerity attacks of his treasurer.”

Rajoy had named Bárcenas treasurer and the PP paid Bárcena’s salary until December 2012, as well as part of his legal defense expenses, despite the deepening court investigation. Even after a secret accounting ledger – kept by Bárcenas and allegedly confirming illegal party financing and undeclared cash payments to party leaders, including Rajoy – was uncovered, Rajoy's encouraging text messages continued.

But Bárcenas initially hid the exchange, one of several damaging revelations he had threatened to uncover if the PP didn’t keep him from jail. A court ordered his arrest without bail in June over flight risk.

Since then, Bárcenas has retracted a long line of denials of any personal or PP corruption, incriminating in the process numerous party leaders for the institutionally sanctioned scheme to procure illegal cash payments, mostly from construction companies, in exchange for state contracts. The slush fund was then used for campaigning, luxurious expenses, and cash bonuses for leaders.

Many worry that more damaging revelations could be forthcoming, putting Rajoy in the uncomfortable situation of having lied about what he did or how much he knew.

“The PP is wagering that Bárcenas will not reveal anything more serious. But that is the question,” says Jaime Pastor, political science professor in Universidad National de Educación a Distancia and an expert on public opinion trends.

Internal revolt

The risk is not just that Rajoy could resign. According to a poll, the PP is facing growing unpopularity, and has shed almost half of its electoral support since it won an absolute majority in November 2011 elections.

“Lack of support doesn’t translate into a change in government. It will depend on the PP and its support base,” says Dr. Ortega.

“The key is what happens within the PP and that depends on what Bárcenas reveals. So far, there is no rush and the PP has closed ranks, but that could change,” says Dr. Pastor, referring to growing internal divisions and talk of internal revolt seeking to force Rajoy to resign in favor of another PP leader.

“The problem is to what extent Rajoy will be able to apply any substantive policies, like the pension reforms demanded by Europe, especially ahead of next year’s elections to the European Parliament,” he says. “That will be an important test and he will try to delay the political drain until then, but that will depend on what happens this year with the Bárcenas case.”

The longer term risk is citizen antipathy of all institutions. “When people don’t trust their leader, parliament, the King, political parties, and the most trustworthy institutions are the army and police, we are facing a horrible scenario. We are starting to look like Egypt,” says Ortega.